Monday, January 30, 2012
Loan Debt Forgiveness
Should you do a short sale? Great question. Are you upside down on your mortgage with no end in sight. Then you might want to consider this article that was in the LA Times.The tax-relief law allows homeowners to exclude from income certain debts forgiven by their lenders. The tax break expires Dec. 31, 2012, but keep in mind that a short sale or foreclosure can take many months.
January 29, 2012|By Lew Sichelman LA Times
Reporting From Washington — The window is closing rapidly on one of the most important tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners.
Although the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lenders doesn’t expire until Dec. 31, it’s likely to take every bit of the next 11 months for financially troubled homeowners to persuade their banks to either foreclose or allow their houses to be sold for less than they are worth.
Although owners who are struggling to hold on to their homes shouldn’t throw in the towel solely because of the pending tax bite, it is certainly something to consider.
Under the tax code, borrowed money need not be reported as income because you have an obligation to repay. But if the lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists.
So, if you owe $250,000 and your lender forgives $50,000 of that debt in a $200,000 refinancing, that $50,000 is considered income. If your combined federal and state marginal tax rate is 36%, you would owe $18,000 in taxes.
Under the Mortgage Forgiveness Debt Relief Act of 2007, though, taxpayers are allowed to exclude from income the discharge of debt on their principal residence — at least until 2013.
So when your lender agrees to a short sale, there is no tax on the difference between the selling price and the amount you owe. When your lender forecloses, there is no tax on the canceled debt. Even when you refinance at a lower loan balance, there is no tax on the difference between what you owed on the old loan and what you owe on the new one.
But unless Congress extends the law — and there is no indication lawmakers are even thinking about that — all residential mortgage debt relief that takes place on or after Jan. 1, 2013, will once again be considered taxable income.
Why worry about this nearly a year before the law changes? Because the timelines on debt forgiveness decisions by lenders are absolutely horrendous.
As of October, it was taking lenders an average of 674 days to process a foreclosure, according to Lender Processing Services, a Jacksonville, Fla., mortgage technology firm. That’s more than 22 months, or almost two years from the time the process starts to when the property is actually repossessed. And lenders don’t even start the process until an average of 391 days after last receiving a payment.
Of course, each state has a different timeline.
There are no hard and fast numbers when it comes to short sales or refinancings. But they also can be long, drawn-out transactions.
According to a nearly year-old survey by Equi-Trax Asset Solutions, a Santa Barbara analytics company, it can take four to nine months for underwater borrowers to persuade their lenders to sign off on a deal in which the lender will net less than what the borrower owes.
Eighteen percent of the 600 agents polled said short sales can be closed in less than three months if the stars line up just right. But almost 10% said these transactions require more than 10 months to complete.
A refinancing that involves principal amnesty is probably the quickest of the three debt-forgiveness scenarios. At Carrington Mortgage Services, a Santa Ana-based lender licensed in 32 states, a “short-refi” takes 45 to 60 days.
There are many factors besides a tax break to consider when deciding whether to give up your house. What will a foreclosure or short sale do to your all-important credit score? How long will you be precluded from buying another house? Will the extra income push you into a higher tax bracket?
As always when it comes to such matters, you should consult a tax professional before making any decisions.
Here are a few of the other important rules that you and your tax person need to know:
• The debt-relief law applies only to debt incurred to buy, build or improve a personal residence.
• The law does not apply to vacation homes or investment properties.
• The maximum amount you can treat as indebtedness is $2 million, or $1 million if you are married but filing separately.
For more detailed information, see IRS Publication 4681.
Wednesday, January 25, 2012
Why 33% of Real Estate Transactions are Not Closing Escrow
Why 33% of Purchase Transactions are Not Closing Escrow
According to recent figures from the National Association of Realtors (NAR), 33% of purchase transactions are not closing escrow right now. NAR also advises the two main reasons for the contract cancellations are, #1 loan applications are being declined by lenders, and #2 appraisals are not coming in at value to match the negotiated sales price (see below). After discussing these issues with several underwriters this past week, here are some tips that you can use that will ensure your transactions do not run into any problems.
1. Why are so many loan applications being denied?
According to several different underwriters I talked to, the two main reasons lenders are denying loan applications are, #1 the buyer did not qualify for the loan program the lender submitted for approval, as the underwriting guidelines for the particular loan program were not followed, and #2, the documentation sent in on the loan application was not verified upfront. As there are quite a few examples I could elaborate on why the underwriters are denying applications, I will only go through a few of these. For example, the underwriters mentioned that “FHA buyers purchasing condos“ and “Buyers purchasing flipped properties” are 2 types of transactions that they seem to decline more than most. So here are some tips to make sure these two purchase options go smoothly.
FHA Buyers Purchasing Condos
According to FHA underwriters, the majority of FHA transactions that do NOT close escrow are due to one of the following 4 reasons below. If your client is interested in buying a condo & obtaining FHA financing, try and get the following 4 questions answered upfront to ensure the complex will qualify for FHA financing, otherwise when the HOA cert comes in and one of these 4 below are wrong, the loan will be denied.
1. Is the complex currently FHA approved? The complex has to be FHA approved, here is a link to check if a complex is FHA approved or not.
2. What are the owner occupied ratios? Remember FHA needs 50% of the units to be Owner occupied!
3. Are there less than 15% of the units in the complex currently delinquent. The FHA requires that no more than 15% of the units can be delinquent in a 30 day period.
4. Is there any current litigation in the complex? The FHA will not allow any financing in a complex that has litigation.
*Here is a Solution. If a particular complex is NOT FHA approved, then the buyer can qualify for 5% down conventional financing instead. It is a much better loan for the buyer anyway as it eliminates the expensive FHA monthly mortgage insurance, so they will get an even lower monthly payment.
Buyers Purchasing Flipped Properties
Another reason loan applications are being denied, is because the property was a “Flip” and did not meet the qualifications for financing. For example even though Fannie Mae, FHA and the VA have no problems financing flips even if the seller is making >20% in less than 90 days of resale, unfortunately there are Conventional, FHA and VA lenders that will not finance this type of transaction at all.
Some conventional lenders also require 2 appraisals and when one comes in lower than the other this will kill the deal (you must use the lower of the 2 appraisals). *2 appraisals are required on FHA flips where the seller is making >20% within 90 days of resale. So the problem with flips is that some lenders have their own “Overlays” or rules that they apply on top of Fannie Mae, FHA and VA flip rules to help limit their loan risk. So therefore it is very important that the right lender is chosen upfront to ensure it will not run into problems.
Here is a summary of the rules for purchasing flipped properties when obtaining either Conventional, FHA or VA financing, New Rules Buyers and Sellers Must Know About Financing Flipped Properties.
2. Appraisals are Not Coming in at Value?
The #2 reason why 33% of transactions are falling out of escrow right now is because appraised values are coming in below the negotiated price! We all hear about out-of-area appraisers who don’t know the local market, use of distressed-sale properties to appraise a property that is not being sold under distress, and lack of comparable sales. The key to a good appraisal is using accurate comparable sales to arrive at an appropriate price for the property in question.
New HVCC Rules have Created Problems
We all know that Fannie Mae initiated changes in appraisal guidelines in 2009 via HVCC that prohibit mortgage brokers or agents from selecting the appraiser. However, even though the loan officer can’t have direct contact with the appraiser, a real estate agent can. Here are 4 tips for agents to help with appraisals.
4 Appraisal Tips for agents
Here are some good tips for agents to follow when the appraisal is being done on a transaction, that will help ensure the final appraised value is not left up to chance.
1. Meet the appraiser at the property.
The buyers or sellers real estate agent should always plan to meet the appraiser at the property to offer relevant comparable sales information. Make sure you are the contact to schedule the appraisal and then go meet the appraiser at the property and find out if he knows the area, what data is he using etc, so you can ensure that you are giving every chance for the appraised value to come in at the purchase price.
2. Improvement list provided to appraiser
If improvements have been made to the property, or there are features that don’t meet the eye, a list should be provided to the appraiser so they can include this in their final report.
3. Public records are often wrong
The public record is often wrong, particularly regarding square footage. Any documentation to justify a different number should be made available. According to current appraisal guidelines, square footage added without a building permit usually won’t get credit as usable square feet. This can lower the appraised value.
4. When there aren’t enough comps for past 3 months
When there aren’t comps for the past three months, it’s critical the appraiser is provided with the data upon which to make an accurate evaluation, particularly if the appraiser is unfamiliar with the local market.
As appraisers these days now work for the lenders and have no relationship with any parties on the transaction, unfortunately there will be appraisers that do not care what the final value comes in, as they get paid regardless of the quality of their work! Therefore it is important to do what we can to improve the odds that the final appraised value is not left up to chance.
Doing the homework upfront on transactions is key
It is no secret that lenders are changing their rules all the time these days and most would say much too often, one underwriter told me they had over 100 new rule changes to deal with last quarter alone on Fannie, FHA and VA loans. So if a loan officer is not paying very close attention to all of these changes and is not doing thorough homework upfront on the buyers or the property, the buyer can be put into a transaction that will not close escrow.
Your real estate agent and loan officer both have to do their home work you put an offer on a home. If you need help finding either Call my office will we assist finding the right agent or lender so you can avoid these types of issues. Call 760-605-1632
According to recent figures from the National Association of Realtors (NAR), 33% of purchase transactions are not closing escrow right now. NAR also advises the two main reasons for the contract cancellations are, #1 loan applications are being declined by lenders, and #2 appraisals are not coming in at value to match the negotiated sales price (see below). After discussing these issues with several underwriters this past week, here are some tips that you can use that will ensure your transactions do not run into any problems.
1. Why are so many loan applications being denied?
According to several different underwriters I talked to, the two main reasons lenders are denying loan applications are, #1 the buyer did not qualify for the loan program the lender submitted for approval, as the underwriting guidelines for the particular loan program were not followed, and #2, the documentation sent in on the loan application was not verified upfront. As there are quite a few examples I could elaborate on why the underwriters are denying applications, I will only go through a few of these. For example, the underwriters mentioned that “FHA buyers purchasing condos“ and “Buyers purchasing flipped properties” are 2 types of transactions that they seem to decline more than most. So here are some tips to make sure these two purchase options go smoothly.
FHA Buyers Purchasing Condos
According to FHA underwriters, the majority of FHA transactions that do NOT close escrow are due to one of the following 4 reasons below. If your client is interested in buying a condo & obtaining FHA financing, try and get the following 4 questions answered upfront to ensure the complex will qualify for FHA financing, otherwise when the HOA cert comes in and one of these 4 below are wrong, the loan will be denied.
1. Is the complex currently FHA approved? The complex has to be FHA approved, here is a link to check if a complex is FHA approved or not.
2. What are the owner occupied ratios? Remember FHA needs 50% of the units to be Owner occupied!
3. Are there less than 15% of the units in the complex currently delinquent. The FHA requires that no more than 15% of the units can be delinquent in a 30 day period.
4. Is there any current litigation in the complex? The FHA will not allow any financing in a complex that has litigation.
*Here is a Solution. If a particular complex is NOT FHA approved, then the buyer can qualify for 5% down conventional financing instead. It is a much better loan for the buyer anyway as it eliminates the expensive FHA monthly mortgage insurance, so they will get an even lower monthly payment.
Buyers Purchasing Flipped Properties
Another reason loan applications are being denied, is because the property was a “Flip” and did not meet the qualifications for financing. For example even though Fannie Mae, FHA and the VA have no problems financing flips even if the seller is making >20% in less than 90 days of resale, unfortunately there are Conventional, FHA and VA lenders that will not finance this type of transaction at all.
Some conventional lenders also require 2 appraisals and when one comes in lower than the other this will kill the deal (you must use the lower of the 2 appraisals). *2 appraisals are required on FHA flips where the seller is making >20% within 90 days of resale. So the problem with flips is that some lenders have their own “Overlays” or rules that they apply on top of Fannie Mae, FHA and VA flip rules to help limit their loan risk. So therefore it is very important that the right lender is chosen upfront to ensure it will not run into problems.
Here is a summary of the rules for purchasing flipped properties when obtaining either Conventional, FHA or VA financing, New Rules Buyers and Sellers Must Know About Financing Flipped Properties.
2. Appraisals are Not Coming in at Value?
The #2 reason why 33% of transactions are falling out of escrow right now is because appraised values are coming in below the negotiated price! We all hear about out-of-area appraisers who don’t know the local market, use of distressed-sale properties to appraise a property that is not being sold under distress, and lack of comparable sales. The key to a good appraisal is using accurate comparable sales to arrive at an appropriate price for the property in question.
New HVCC Rules have Created Problems
We all know that Fannie Mae initiated changes in appraisal guidelines in 2009 via HVCC that prohibit mortgage brokers or agents from selecting the appraiser. However, even though the loan officer can’t have direct contact with the appraiser, a real estate agent can. Here are 4 tips for agents to help with appraisals.
4 Appraisal Tips for agents
Here are some good tips for agents to follow when the appraisal is being done on a transaction, that will help ensure the final appraised value is not left up to chance.
1. Meet the appraiser at the property.
The buyers or sellers real estate agent should always plan to meet the appraiser at the property to offer relevant comparable sales information. Make sure you are the contact to schedule the appraisal and then go meet the appraiser at the property and find out if he knows the area, what data is he using etc, so you can ensure that you are giving every chance for the appraised value to come in at the purchase price.
2. Improvement list provided to appraiser
If improvements have been made to the property, or there are features that don’t meet the eye, a list should be provided to the appraiser so they can include this in their final report.
3. Public records are often wrong
The public record is often wrong, particularly regarding square footage. Any documentation to justify a different number should be made available. According to current appraisal guidelines, square footage added without a building permit usually won’t get credit as usable square feet. This can lower the appraised value.
4. When there aren’t enough comps for past 3 months
When there aren’t comps for the past three months, it’s critical the appraiser is provided with the data upon which to make an accurate evaluation, particularly if the appraiser is unfamiliar with the local market.
As appraisers these days now work for the lenders and have no relationship with any parties on the transaction, unfortunately there will be appraisers that do not care what the final value comes in, as they get paid regardless of the quality of their work! Therefore it is important to do what we can to improve the odds that the final appraised value is not left up to chance.
Doing the homework upfront on transactions is key
It is no secret that lenders are changing their rules all the time these days and most would say much too often, one underwriter told me they had over 100 new rule changes to deal with last quarter alone on Fannie, FHA and VA loans. So if a loan officer is not paying very close attention to all of these changes and is not doing thorough homework upfront on the buyers or the property, the buyer can be put into a transaction that will not close escrow.
Your real estate agent and loan officer both have to do their home work you put an offer on a home. If you need help finding either Call my office will we assist finding the right agent or lender so you can avoid these types of issues. Call 760-605-1632
Wednesday, January 18, 2012
How do you Negotiate?
Negotiating skills vary from person to person. How do you negotiate? I took a class on negotiating which helped me tremendously. Why would I take a class on it? Because I needed to. I did not realize what I was losing and giving away.
First rule I learned was; be willing at all times to walk away. This means to me that I can not allow myself to show my emotional attachment to whatever it is I am trying to buy or sell, including my services as a real estate agent. This is not an easy task however when you learn this skill it empowers you.
Always set a limit. You have to know where you are and how far you are willing to go. You can end up giving more away than you wanted to or can afford to if you do not set limits. This gives you the ability to know when to walk.
Learn to bluff. Walk away and do not run back to table walk back to table. If they see you walking and they give up something walk back don't run.
Never take the first offer. I have always wondered after the fact how much more could I have gotten. Make your price drops smaller and smaller that way you give the appearance of reaching you bottom line before you get there.
I have attached an article on another realtors angle on negotiating I hope this helps you get more value for yourselves and your customers.
5 faces of real estate dealmaking: from 'Drama Queen' to 'No-gotiator'
Mood of the Market
By Tara-Nicholle Nelson
Inman News®
I was one of those kids who was mortally embarrassed by my parents. (I later realized that their fashion choices were not bizarre -- they were just '70s chic held over a tad bit too long.) My mother seemed always to gravitate to the yellow 'sale' signs on top of retail racks -- which seemed horrifying back then.
And my Dad? Horror of horrors, he tried to negotiate everything -- and I mean every single thing. He would actually bargain for things like TVs and computers at stores like Sears, and I would grow hot with embarrassment, detouring into what we'd now call the "tween" section, hoping no one would know we were related.
Fast forward 10 or 15 years, and you'd find me, at an appliance outlet, getting my washer and dryer for 50 percent off because the front windows had been scratched, and negotiating for them to order and install new windows before delivering the machines to me.
In my adulthood, my Dad and I have often worked together on strategies for negotiating our largest purchases -- particularly when it comes to real estate. (My Dad is a prolific investor, and I've negotiated for a hundred or so homes myself.)
I've noticed that my Dad and I have distinct negotiating styles. I tend to gravitate toward properties that are already value-priced, get as much information as possible about the seller's situation, and negotiate a reasonable discount plus as many perks and incentives thrown in as I can.
I like places with major upside potential, so I can control how their value increases, no matter what's going on in the market.
My Dad tends to run all sorts of numbers and analytics, plus wield the fact that he pays in cash, as major bargaining leverage. And his constant refrain is "Buy it right." He wants to feel that he is buying a place that already has lots of equity and/or cash flow potential because he bought it for such a low price -- it takes the pressure off when he later wants or needs to sell.
We share in common that we never make our best offer on our first offer (except in a seller's market, when all the rules change) and we virtually never accept the first offer we receive.
We both place a strong priority on neighborhoods, have a tendency to avoid getting emotionally involved or attached at all to homes, and insist on starting the negotiation off being very clear and realistic in our own minds about the contours of our own personal top or bottom lines.
As I contemplated how my father's negotiating skills and my own negotiating styles are similar and dissimilar, I could not escape noticing how other buyers' and sellers' negotiating styles can be grouped into profiles, so to speak.
Some I've run into more than a few times in my real estate lifetime include:
1. "The Faux-gotiator." The Faux-gotiator makes a minimal effort at negotiating, because she knows that's what she's supposed to do. Like my Dad and I, this breed of negotiator tries to abide by the never-take-the-first-offer rule. But the Faux-gotiator caves at the slightest sense of resistance from across the negotiating table. And devotees of this style come in two varietals: lazy (they simply don't want to do the work of negotiating, so they barely bother) and attached (they just love the house too much -- or need to sell too much -- to give more than a modicum of negotiating effort).
2. "The Drama Queen or King." These wannabe royals are, in some ways, the opposite of the Faux-gotiator. They make a big hue and cry about how "hard core" their bargaining skills are, about how the other side's issues or interests are just "not relevant" to them, and about how outraged they are when they receive resistance from across the negotiating table.
Yet all that drama tends to be a front behind which they hide truly poor negotiation skills. After they wax hyperbolic, they tend to cave and strike deals not too far from the original list price or offer. Methinks they doth protest too much; often the drama is driven by a premature attachment to the property or sale, or the fact that they have no basis in market data or facts for their negotiation demands.
3. "The High-Rolling Lowballer." These folks pull up to view a modest starter home in a rapper-style Mercedes Benz, and literally drip logos in their wake as they tour the home. Though they seem to have the highest possible ratio of status symbols per square inch of body area, when it's time to actually buy or sell a home, they insist on overpricing or lowballing the seller beyond all reason.
These folks cause lots of head-shaking by the agents and other parties in their transactions, as it seems that a slight reprioritization of their real estate matters over high-status consumer goods might make them better able to make reality-based offer and pricing decisions.
4. "The No-gotiator." These are the folks who offer to pay the list price or take the first offer, as a matter of course, even when the market or transaction dynamics suggest that they could get better terms. Some No-gotiators find the confrontational, adversarial connotations of negotiationg distasteful or anxiety-creating. Others are so attached to a certain outcome that they fear the deal falling apart too much to try to push back against the list price or buyer's offer.
5. "The Reality Checker." Finally, there's a fifth type of real estate consumer negotiation profile, which I'll call the Reality Checker. These negotiators do the research. They know how long the place has been on the market, relative to average in the area; and they're well aware of how much list prices are usually able to be bargained down in that neck of the woods.
They have asked for information about the other side's priorities and, to the extent they received any, they have taken that information into consideration in formulating their offer or response. They are clear about what they can afford to do, and how much they simply want a particular property or outcome, but they are not overly optimistic about their negotiating prowess or unrealistic about what the market will bear.
And they don't go in with rules of thumb -- always trying to get 20 percent off, or some such. They make a smart offer (or counteroffer), or accept the other side's position when reasonable and affordable. And, not surprisingly, they often succeed in both striking a good deal and actually getting what they want.
First rule I learned was; be willing at all times to walk away. This means to me that I can not allow myself to show my emotional attachment to whatever it is I am trying to buy or sell, including my services as a real estate agent. This is not an easy task however when you learn this skill it empowers you.
Always set a limit. You have to know where you are and how far you are willing to go. You can end up giving more away than you wanted to or can afford to if you do not set limits. This gives you the ability to know when to walk.
Learn to bluff. Walk away and do not run back to table walk back to table. If they see you walking and they give up something walk back don't run.
Never take the first offer. I have always wondered after the fact how much more could I have gotten. Make your price drops smaller and smaller that way you give the appearance of reaching you bottom line before you get there.
I have attached an article on another realtors angle on negotiating I hope this helps you get more value for yourselves and your customers.
5 faces of real estate dealmaking: from 'Drama Queen' to 'No-gotiator'
Mood of the Market
By Tara-Nicholle Nelson
Inman News®
I was one of those kids who was mortally embarrassed by my parents. (I later realized that their fashion choices were not bizarre -- they were just '70s chic held over a tad bit too long.) My mother seemed always to gravitate to the yellow 'sale' signs on top of retail racks -- which seemed horrifying back then.
And my Dad? Horror of horrors, he tried to negotiate everything -- and I mean every single thing. He would actually bargain for things like TVs and computers at stores like Sears, and I would grow hot with embarrassment, detouring into what we'd now call the "tween" section, hoping no one would know we were related.
Fast forward 10 or 15 years, and you'd find me, at an appliance outlet, getting my washer and dryer for 50 percent off because the front windows had been scratched, and negotiating for them to order and install new windows before delivering the machines to me.
In my adulthood, my Dad and I have often worked together on strategies for negotiating our largest purchases -- particularly when it comes to real estate. (My Dad is a prolific investor, and I've negotiated for a hundred or so homes myself.)
I've noticed that my Dad and I have distinct negotiating styles. I tend to gravitate toward properties that are already value-priced, get as much information as possible about the seller's situation, and negotiate a reasonable discount plus as many perks and incentives thrown in as I can.
I like places with major upside potential, so I can control how their value increases, no matter what's going on in the market.
My Dad tends to run all sorts of numbers and analytics, plus wield the fact that he pays in cash, as major bargaining leverage. And his constant refrain is "Buy it right." He wants to feel that he is buying a place that already has lots of equity and/or cash flow potential because he bought it for such a low price -- it takes the pressure off when he later wants or needs to sell.
We share in common that we never make our best offer on our first offer (except in a seller's market, when all the rules change) and we virtually never accept the first offer we receive.
We both place a strong priority on neighborhoods, have a tendency to avoid getting emotionally involved or attached at all to homes, and insist on starting the negotiation off being very clear and realistic in our own minds about the contours of our own personal top or bottom lines.
As I contemplated how my father's negotiating skills and my own negotiating styles are similar and dissimilar, I could not escape noticing how other buyers' and sellers' negotiating styles can be grouped into profiles, so to speak.
Some I've run into more than a few times in my real estate lifetime include:
1. "The Faux-gotiator." The Faux-gotiator makes a minimal effort at negotiating, because she knows that's what she's supposed to do. Like my Dad and I, this breed of negotiator tries to abide by the never-take-the-first-offer rule. But the Faux-gotiator caves at the slightest sense of resistance from across the negotiating table. And devotees of this style come in two varietals: lazy (they simply don't want to do the work of negotiating, so they barely bother) and attached (they just love the house too much -- or need to sell too much -- to give more than a modicum of negotiating effort).
2. "The Drama Queen or King." These wannabe royals are, in some ways, the opposite of the Faux-gotiator. They make a big hue and cry about how "hard core" their bargaining skills are, about how the other side's issues or interests are just "not relevant" to them, and about how outraged they are when they receive resistance from across the negotiating table.
Yet all that drama tends to be a front behind which they hide truly poor negotiation skills. After they wax hyperbolic, they tend to cave and strike deals not too far from the original list price or offer. Methinks they doth protest too much; often the drama is driven by a premature attachment to the property or sale, or the fact that they have no basis in market data or facts for their negotiation demands.
3. "The High-Rolling Lowballer." These folks pull up to view a modest starter home in a rapper-style Mercedes Benz, and literally drip logos in their wake as they tour the home. Though they seem to have the highest possible ratio of status symbols per square inch of body area, when it's time to actually buy or sell a home, they insist on overpricing or lowballing the seller beyond all reason.
These folks cause lots of head-shaking by the agents and other parties in their transactions, as it seems that a slight reprioritization of their real estate matters over high-status consumer goods might make them better able to make reality-based offer and pricing decisions.
4. "The No-gotiator." These are the folks who offer to pay the list price or take the first offer, as a matter of course, even when the market or transaction dynamics suggest that they could get better terms. Some No-gotiators find the confrontational, adversarial connotations of negotiationg distasteful or anxiety-creating. Others are so attached to a certain outcome that they fear the deal falling apart too much to try to push back against the list price or buyer's offer.
5. "The Reality Checker." Finally, there's a fifth type of real estate consumer negotiation profile, which I'll call the Reality Checker. These negotiators do the research. They know how long the place has been on the market, relative to average in the area; and they're well aware of how much list prices are usually able to be bargained down in that neck of the woods.
They have asked for information about the other side's priorities and, to the extent they received any, they have taken that information into consideration in formulating their offer or response. They are clear about what they can afford to do, and how much they simply want a particular property or outcome, but they are not overly optimistic about their negotiating prowess or unrealistic about what the market will bear.
And they don't go in with rules of thumb -- always trying to get 20 percent off, or some such. They make a smart offer (or counteroffer), or accept the other side's position when reasonable and affordable. And, not surprisingly, they often succeed in both striking a good deal and actually getting what they want.
Monday, January 16, 2012
What does better mean to you?
Are we going to have a better real estate market this year? This is a questions real estate agents are getting asked a lot lately. Well are we? This is all about perspective.
From my stand point. Will I sell more house this year than last? Yes I already am ahead of last year in open escrows and buyers appointments. I will have more listings because I have a better marketing plan and I am more self disciplined than last year.
How is this of any interest to anyone else? Good question. That is my perspective. If you want to sell your house the market value may not be what you want it to be, however there are buyers out there and they are buying.
Are we done with short sales? Not by a long shot. I wish we were, we will be when people get back to work everywhere not just in certain areas. read the following for other perspectives on the up coming years real estate market.
Perspectives on a 'better' real estate market
Housing recovery may not bring a sales spike
By Glenn Roberts Jr.
Inman News®
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NEW YORK -- When the real estate market improves has a lot to do with your perspective on the market, said Alex Perriello, president and CEO for Realogy Franchise Group, during a panel presentation Thursday at the Real Estate Connect conference.
"Oftentimes I'm asked, 'When's the market going to get better?' It all depends on how you define the word 'better,' " Perriello said during a panel presentation titled "The State of Real Estate: The Year Ahead."
"If you define 'better' as 'When will I not have to deal with foreclosures, short sales, underwater homes, people with damaged credit, (problems with appraisals), tough lending standards?' the answer to that is 'No time soon' -- at least for the next two or three years, and in some places, depending on where you live, it could be much longer than that."
He added, "If you define 'better' as 'When am I going to make more money in this business?' he noted that even if real estate sales fall to 4 million this year -- less than the 4.2 million in 2011, $35 billion in sales commissions are going to be earned by someone in this industry over the next 12 months." Realogy operates company-owned offices and franchise networks under the Coldwell Banker, Century 21, Sotheby's International Realty, and Better Homes and Gardens Real Estate brands, among others.
Diana Olick, real estate correspondent for CNBC and author of the "Realty Check" blog at CNBC.com, who also participated in the panel session, said she doesn't expect a sharp rebound once the real estate recovery takes hold.
She said she expects that at some point in the middle of 2012 "we are going to see the price stabilization we need, then people are going to start to buy," adding, "I don't think we're going to see a great surge up ... we're going to see pockets of strength in certain markets."
The factors that she expects will keep the real estate market subdued: deflated consumer confidence, and the need to work through the stream of distressed properties.
Olick and Perriello agreed that reduction of principal for distressed homeowners has proven one of the most effective deterrents to foreclosure, and panelists generally agreed that the foreclosure process is taking far too long to run its course in many areas.
Olick said that the problem is that many homeowners appear to be "staying in their houses and gaming the system," living in their homes without paying the mortgage for several years, in some cases. "That's a big problem right now," Olick said.
She also said she believes that investors will be at the forefront of the real estate recovery.
While investors -- namely house-flipping speculators -- have been vilified for their role in driving up prices during the boom years, Olick said that "it is the private equity, the institutional markets, coming in and taking the distress out of the markets that we need right now. That's going to be the strength in the market this year, and that's a good thing."
Margaret Kelly, CEO for Re/Max LLC and a fellow panelist, said that real estate professionals "have to embrace investors," agreeing that investors have an important role to play in working through excess inventory. Many investor-bought properties are converted to rental housing, she noted.
Kelly said she believes the short-sale process must be improved and expedited, and appraisal reform is also needed. "Appraisals have been a nightmare," she said.
Perriello's primary hope for the housing market: "If I could fix one thing, it would be a clear, concise national housing policy from Washington, D.C.
"If you think about the last three or four years, it's been a mixed bag," he said. "On the good side we've had government agencies buying up mortgage-backed securities, which has provided capital to the market, which has been a good thing -- it's kept interest rates low."
The series of federal homebuyer tax credit programs have also provided some welcome relief, he said.
"On the negative side, you've got legislation that's been passed -- like Dodd-Frank would be a perfect example -- that's now in the hands of the regulators. And if the regulators have their way it's going to be, I believe, very damaging for housing and it's going to make mortgage lending even more difficult for the homebuyer to get a loan and it's going to be more expensive."
There have also been mixed messages over the mortgage interest tax deduction, and policy reversals over loan limits, he said.
"People are concerned, there's doubt in the market, and whenever there's uncertainty and doubt in the market people sit back and say, 'I think I'll wait,' " he said.
From my stand point. Will I sell more house this year than last? Yes I already am ahead of last year in open escrows and buyers appointments. I will have more listings because I have a better marketing plan and I am more self disciplined than last year.
How is this of any interest to anyone else? Good question. That is my perspective. If you want to sell your house the market value may not be what you want it to be, however there are buyers out there and they are buying.
Are we done with short sales? Not by a long shot. I wish we were, we will be when people get back to work everywhere not just in certain areas. read the following for other perspectives on the up coming years real estate market.
Perspectives on a 'better' real estate market
Housing recovery may not bring a sales spike
By Glenn Roberts Jr.
Inman News®
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NEW YORK -- When the real estate market improves has a lot to do with your perspective on the market, said Alex Perriello, president and CEO for Realogy Franchise Group, during a panel presentation Thursday at the Real Estate Connect conference.
"Oftentimes I'm asked, 'When's the market going to get better?' It all depends on how you define the word 'better,' " Perriello said during a panel presentation titled "The State of Real Estate: The Year Ahead."
"If you define 'better' as 'When will I not have to deal with foreclosures, short sales, underwater homes, people with damaged credit, (problems with appraisals), tough lending standards?' the answer to that is 'No time soon' -- at least for the next two or three years, and in some places, depending on where you live, it could be much longer than that."
He added, "If you define 'better' as 'When am I going to make more money in this business?' he noted that even if real estate sales fall to 4 million this year -- less than the 4.2 million in 2011, $35 billion in sales commissions are going to be earned by someone in this industry over the next 12 months." Realogy operates company-owned offices and franchise networks under the Coldwell Banker, Century 21, Sotheby's International Realty, and Better Homes and Gardens Real Estate brands, among others.
Diana Olick, real estate correspondent for CNBC and author of the "Realty Check" blog at CNBC.com, who also participated in the panel session, said she doesn't expect a sharp rebound once the real estate recovery takes hold.
She said she expects that at some point in the middle of 2012 "we are going to see the price stabilization we need, then people are going to start to buy," adding, "I don't think we're going to see a great surge up ... we're going to see pockets of strength in certain markets."
The factors that she expects will keep the real estate market subdued: deflated consumer confidence, and the need to work through the stream of distressed properties.
Olick and Perriello agreed that reduction of principal for distressed homeowners has proven one of the most effective deterrents to foreclosure, and panelists generally agreed that the foreclosure process is taking far too long to run its course in many areas.
Olick said that the problem is that many homeowners appear to be "staying in their houses and gaming the system," living in their homes without paying the mortgage for several years, in some cases. "That's a big problem right now," Olick said.
She also said she believes that investors will be at the forefront of the real estate recovery.
While investors -- namely house-flipping speculators -- have been vilified for their role in driving up prices during the boom years, Olick said that "it is the private equity, the institutional markets, coming in and taking the distress out of the markets that we need right now. That's going to be the strength in the market this year, and that's a good thing."
Margaret Kelly, CEO for Re/Max LLC and a fellow panelist, said that real estate professionals "have to embrace investors," agreeing that investors have an important role to play in working through excess inventory. Many investor-bought properties are converted to rental housing, she noted.
Kelly said she believes the short-sale process must be improved and expedited, and appraisal reform is also needed. "Appraisals have been a nightmare," she said.
Perriello's primary hope for the housing market: "If I could fix one thing, it would be a clear, concise national housing policy from Washington, D.C.
"If you think about the last three or four years, it's been a mixed bag," he said. "On the good side we've had government agencies buying up mortgage-backed securities, which has provided capital to the market, which has been a good thing -- it's kept interest rates low."
The series of federal homebuyer tax credit programs have also provided some welcome relief, he said.
"On the negative side, you've got legislation that's been passed -- like Dodd-Frank would be a perfect example -- that's now in the hands of the regulators. And if the regulators have their way it's going to be, I believe, very damaging for housing and it's going to make mortgage lending even more difficult for the homebuyer to get a loan and it's going to be more expensive."
There have also been mixed messages over the mortgage interest tax deduction, and policy reversals over loan limits, he said.
"People are concerned, there's doubt in the market, and whenever there's uncertainty and doubt in the market people sit back and say, 'I think I'll wait,' " he said.
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